FOREWORD. Cameroon. Services provided by member firms include:

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1 2016/17

2 FOREWORD A country's tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. As you will appreciate, the production of the WWTG is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country's taxes that forms the heart of this publication. The PKF Worldwide Tax Guide 2016/17 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of the world's most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current on 30 April 2016, while also noting imminent changes where necessary. On a country-by-country basis, each summary such as this one, addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country's personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. Services provided by member firms include: Assurance & Advisory; Financial Planning / Wealth Management; Corporate Finance; Management Consultancy; IT Consultancy; Insolvency - Corporate and Personal; Taxation; Forensic Accounting; and, Hotel Consultancy. In addition to the printed version of the WWTG, individual country taxation guides such as this are available in PDF format which can be downloaded from the PKF website at PKF Worldwide Tax Guide 2016/17 1

3 IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International Limited (PKFI) administers a family of legally independent firms. Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. PKF INTERNATIONAL LIMITED JUNE 2016 PKF INTERNATIONAL LIMITED All RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION PKF Worldwide Tax Guide 2016/17 2

4 STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX SALES TAX / VALUE ADDED TAX (VAT) LOCAL TAXES OTHER TAXES FRINGE BENEFITS TAX (FBT) REGISTRATION DUTY REAL ESTATE WITHHOLDING TAX B. DETERMINATION OF TAXABLE INCOME CAPITAL ALLOWANCES DEPRECIATION STOCK / INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS LOSSES FOREIGN SOURCED INCOME INCENTIVES C. FOREIGN TAX RELIEF D. CONSOLIDATED CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAXES G. EXCHANGE CONTROL H. PERSONAL TAX I. TREATY AND NON-TREATY WITHHOLDING TAX RATES PKF Worldwide Tax Guide 2016/17 3

5 MEMBER FIRM For further advice or information please contact: City Name Contact Information Douala / Buea Christopher Awungjia or cawungjia@acncoaccountants.com BASIC FACTS Full name: Republic of Cameroon Capital: Yaoundé Main languages: English, French Population: 22.5 million (2013 estimate) Major religion: Christianity Monetary unit: Central African CFA franc (XAF) Internet domain:.cm Int. dialling code: +237 KEY TAX POINTS Cameroon operates a declarative tax system in which the taxpayer declares and pays monthly tax collections to the taxation authorities. False declarations are punishable by penalties and interests on late payment. In Cameroon, there are two types of income taxes: - Income tax on individuals - Income tax on entities There is a tax on turnover, borne by the final consumer known as the value added tax. A. TAXES PAYABLE COMPANY TAX Income tax in Cameroon is imposed on undertakings deemed to be operating in Cameroon, which are the following: Undertakings headquartered in Cameroon or with an effective management office in Cameroon Undertakings that have a permanent establishment in Cameroon Undertakings that have a dependent representative in Cameroon The profits of undertakings that do not fulfil the conditions referred to above are taxed in Cameroon if they carry out activities that form a full business cycle in Cameroon. Tax Rates The regular corporate income tax rate is 30% (plus a 10% additional tax council). For companies operating under the real earnings tax regime, the minimum tax payable is 2% (plus 10% additional council tax) of monthly gross sales (turnover). The minimum tax payable is higher for companies under the simplified tax regime (3.3% for non-importing traders, and 5.5% for producers, service providers and importation traders). The minimum tax is creditable against corporate tax due for the current financial year. CAPITAL GAINS TAX Capital gains include gains on the sale of real estate, corporate shares and business assets. The tax, however, can be deferred or eliminated in the event of a merger. PKF Worldwide Tax Guide 2016/17 4

6 BRANCH PROFITS TAX Profits realized in Cameroon by branches of foreign companies are presumed to be distributed and are consequently subject to a branch withholding tax of 16.5% on after-tax income. This rate is subject to reduction by treaty. SALES TAX / VALUE ADDED TAX (VAT) The effective standard VAT rate is 19.25% (a 17.25% VAT and 10% surcharge). Exports are zerorated and certain essential goods are exempt. All corporate businesses with taxable turnover are required to register. Non-resident VAT payers are required to appoint a solvent resident representative to be jointly responsible for the payment of VAT and the discharge of other VAT obligations. VAT returns (and any tax payable) are due by the 15th of each month. Late payment incurs interest penalties at a rate of 1.5% per month up to a maximum of 50% of the principal liability. Fines are levied for various omissions in discharging VAT obligations. For taxable transactions of at least XAF , the deduction right may be authorized only where they have been carried out through bank transfers LOCAL TAXES No local taxes are payable in respect of income of companies OTHER TAXES Business license tax; rate varies depending on the amount of turnover FRINGE BENEFITS TAX (FBT) Fringe benefits are considered to be a part of the salary paid to an employee; they are subject to social security and personal income taxes. Taxable fringe benefits are evaluated on the basis of their market value and there is a maximum amount that can be taxed. REGISTRATION DUTY Registration duty on rent contract is 10% of annual rents. Government Contracts are 4% of the contract amount REAL ESTATE WITHHOLDING TAX Withholding tax on rents is 15% of annual rents. B. DETERMINATION OF TAXABLE INCOME General. Taxable income is based on financial statements prepared according to generally accepted accounting principles and the OHADA (organization for the harmonization of business law in Frenchspeaking Africa) standard statements. Business expenses are generally deductible unless specifically excluded by law or by the provisions of an international convention. Expenses that are not deductible include the following: Head office overhead, research costs and technical, financial and administrative assistance fees paid to residents or non-residents that exceed any of the following: - 5% of taxable profits for ordinary law companies before their deduction - 2.5% of turnover for public works projects PKF Worldwide Tax Guide 2016/17 5

7 - 7.5% of turnover for design and engineering services Royalties from patents, brands, models or designs paid to a non-cemac corporation participating directly or indirectly in the management of, or owning shares in, the Cameroonian corporation are the deductible up to an overall limit of 2.5% of taxable income before the deduction of the expenses. Rent expense for movable equipment paid to a shareholder that manages the company in fact or by right and holds, directly or indirectly, more than 10% of the capital. Losses related to bad debts that do not comply with the enforcement measures provided in the OHADA Uniform Act relating to the organization of simplified procedures for collection and enforcement. Liberalities, gifts and subsidies exceeding 0.5% of the turnover of research, philanthropic, development, educational, sports, scientific, social and family institutions or bodies. Gifts and subsidies exceeding 5% of turnover of clubs participating in official national competitions and the bodies in charge of organizing these competitions. Interest paid to shareholders in excess of the central bank annual rate plus two points. Under the 2014 Financial Law, the deductibility of interest paid to shareholders owning directly or indirectly at least 25% of the capital or voting rights of the company is subject to the following two cumulative conditions: - Interest paid may not exceed one and one-half of the amount of real capital for all shareholders. - Interest paid to such affiliates may not exceed 25% of the income before income tax and deduction of such interest and depreciation. Commissions and brokerage fees for services on behalf of companies located in Cameroon that exceed 5% of purchased imports and sales of exports. Remuneration granted to wage earners that are excessive in comparison to the services rendered and that do not correspond to effective work and conventional norms. Amounts set aside for self-insurance. Certain specific charges (such as contributions other than those for retirement paid to a foreign social security organization, which are deductible up to a limit of 15%, and premium insurance paid to companies located in Cameroon for employees retirement indemnities), gifts, subsidies and penalties (to some extent). Expenses paid in cash of XAF 500,000 or more. The XAF 500,000 limit is assessed with respect to the total amount of specific expenses recorded in the expenditures account. Accordingly, splitting an expense worth XAF 500,000 into two equal parts of XAF 250,000 each and paying them in cash does not result in the deductibility of the expenses. Under the 2014 Financial Law, all reimbursements of loan advances to shareholders paid in cash are treated as dividends and are accordingly subject to dividend withholding tax. Expenses paid to local suppliers without reference to a Cameroonian tax identification number and without an invoice that complies with the standard requirements for the deductibility of expenses. Remuneration paid to liberal professionals in violation of the regulations governing their respective professions. Expenses for services and certain purchases paid to natural persons or nonresident legal entities established in territories or states considered to be tax havens. Disbursements from tax havens invoiced to local companies by other companies located in or outside tax havens. CAPITAL ALLOWANCES Land and intangible assets, such as goodwill, are not depreciable for tax purposes. Other fixed assets may be depreciated using the straight-line method at rates specified by the tax law. Small equipment and other items that have a value not exceeding XAF 400,000 without tax are directly accounted for as charges and considered deductible expenses. DEPRECIATION The Cameroon General Tax code specifies allowable depreciation rates; any deviation is disallowed for tax purposes. PKF Worldwide Tax Guide 2016/17 6

8 STOCK / INVENTORY Inventory is normally valued at the acquisition cost or at the lower of cost or market value. Cost must be determined on a weighted average cost-price method. The first-in, first-out (FIFO) method is also generally acceptable. CAPITAL GAINS AND LOSSES Capital gains are taxed at a rate of 16.5%, subject to tax treaties. Capital gains realized in Cameroon or abroad from the direct or indirect transfer of stocks, bonds and other capital shares of enterprises located in Cameroon are subject to tax. If the business is totally or partially transferred or discontinued (such as in the event of a merger, liquidation or sale of the business), only one-half of the net capital gains is taxed if the event occurs less than five years after the start-up or purchase of the business, and only one-third of the gains is taxed if the event occurs five years or more after the business is begun or purchased. Capital gains realized on the Cameroonian stock market are exempt from corporate income tax and the tax on movable capital. However, under the 2014 Financial Law, capital gains realized in Cameroon or abroad that are derived from the sale of shares by an individual or corporate entity holding exploitation or exploration permit for natural resources extracted from the Cameroonian subsoil are subject to income tax on the gains. DIVIDENDS Dividends paid to residents in Cameroon are subject to a 16.5% withholding tax (15% plus the 10% council surtax). Resident recipients must include the gross dividend in taxable income, but they receive a corresponding 16.5% tax credit to prevent double taxation. Dividends paid to non-residents are subject to a 16.5% withholding tax, which is a final tax. A parent corporation may exclude up to 90% of the dividends received from a 25%-owned subsidiary if the parent company and the subsidiary have their registered office in a Central African Economic and Monetary Community (CEMAC) country (Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea and Gabon). In this case, however, no withholding tax credit is allowed. Instead, the tax can be offset against any withholding tax due on its own dividend distributions. INTEREST DEDUCTIONS Interest paid to shareholders in excess of the central bank annual rate plus two points. Under the 2014 Financial Law, the deductibility of interest paid to shareholders owning directly or indirectly at least 25% of the capital or voting rights of the company is subject to the following two cumulative conditions: Interest paid may not exceed one and one-half of the amount of real capital for all shareholders. Interest paid to such affiliates may not exceed 25% of the income before income tax and deduction of such interest and depreciation. LOSSES Losses may be carried forward for four years; losses attributable to depreciation may be carried forward indefinitely. Losses may not be carried back. FOREIGN SOURCED INCOME Revenues from a foreign source that are subject to tax at source on the payment in the country of origin are not subject to tax in Cameroon in case of existence of bilateral agreement. Non-resident legal entities are taxable on their Algerian source income. Relief from foreign taxes in Cameroon depends on whether a double tax treaty has been concluded by Cameroon. PKF Worldwide Tax Guide 2016/17 7

9 INCENTIVES The law of 18 April 2013 introduced investment incentives, which are summarized below. Installation phase: Incentives that are available during the installation phase (five years after the issuance of the approval) include exemption from registration duties, transfer duties, customs duties and value-added tax for certain items. Operational phase: Incentives available during the operational phase (10 years for all companies qualifying for the incentives) include exemptions or reductions with respect to minimum tax, corporate tax, customs duties on certain items and other specified taxes and fees. In the first year of operation, the company is exempt from the tax on the business license. In addition, companies may carry forward losses to the fifth year following the year in which the losses are incurred. C. FOREIGN TAX RELIEF In general, foreign tax credits are not allowed; income of residents and non-residents subject to foreign tax that is not exempt from Cameroonian tax under the territoriality principle is taxable, net of the foreign tax. The French tax treaty, however, provides a tax credit that corresponds to withholding tax on passive income. D. CONSOLIDATED CORPORATE GROUPS The Cameroon tax code does not provide for taxation of local group companies, each company is evaluated and taxed independently. E. RELATED PARTY TRANSACTIONS In 2012, Article M19 bis in Book II of the General Tax Code on Manual of Tax Procedures was introduced to increase the regulation and control of transfer pricing. Under the new rules, if in the course of an accounts auditing, the administration has evidence that a company has indirectly transferred profit; the administration may request that the company provide information and documents with respect to certain items, including the following: Relationships between the company and one or more companies or groups established outside Cameroon. The pricing method for industrial, commercial or financial operations in which the company engages with the related parties mentioned in the first bullet and justification for this method and the agreed consideration in these operations. The activities carried out by the related parties mentioned in the first bullet. The tax treatment for the company and related parties mentioned in the first bullet with respect to the operations performed with the related parties. The 2014 Financial Law requires a detailed statement of transactions with companies which control or which are controlled by them up to 25%, in addition to other existing disclosure and documentation requirements. Companies in the large taxpayers unit must transmit the following information to the tax authorities by 15 March of each year at the same time of the filing of the annual tax return: A statement of their shareholdings in other companies if the holdings exceed 25% of the share capital A detailed statement of intergroup transactions PKF Worldwide Tax Guide 2016/17 8

10 F. WITHHOLDING TAXES 0 Description Rate (%) Dividends 16.5 (a) Interest 0/16.5 (b) Rents 15 Royalties from Patents, Know-how, etc. 15 Fees for Technical Services, Digital Services and Professional Activities 15 (c) Specific Payments to Resident Individuals or Companies 5.5 (d) Branch Remittance Tax 16.5 a) This withholding tax also applies to directors fees, non-deductible expenses and adjustments of profits following a tax examination. The withholding tax also applies to allowances granted to members of commissions, ad hoc or permanent committees and to members of public, semipublic, regional or local bodies and apply as well to residents and non-residents b) Interest on savings of up to XAF10 million is exempt from withholding tax. Interest on state bonds is exempt from corporate income tax and the tax on movable capital (this tax is withheld at a rate of 16.5% from income on shares and negotiable bonds and from certain other income). The 2014 Financial Law confirms that interest on loans paid to non-resident lenders or creditors is exempt from withholding tax. Special income tax applies to all types of deliveries that are part of public contracts or orders and that are paid for by state, regional or local authorities, public institutions, public corporations or semi-public companies, or that are paid for through external financing. The rate is 15%, which is withheld at source. c) This withholding tax applies to non-residents. The 2012 Financial Law provides that this tax also applies to software, which is defined as computer applications and programs relating to the operation or functioning of an enterprise. d) This withholding tax applies to fees, commissions, emoluments and remuneration for services that are paid to resident individuals or companies. These payments include the following: Payments made to persons in the self-employed professions, such as consultants, experts, architects, physicians, auditors in charge of damages, trade intermediaries and salesmen Payments made to magistrates and representatives of the law (attorneys, bailiffs and notaries) Payments made to forwarding agents, customs brokers, stevedores, accounting firms and internet service providers. The withholding tax does not apply to payments made for services related to transport, bank interest, insurance premiums and commissions, air ticket expenses and commissions, and water, electricity and telephone expenses. The 10% surtax applies to the withholding tax rate of 5%, resulting in a total withholding tax rate of 5.5%. G. EXCHANGE CONTROL All transfer of funds outside the CEMAC, including loans obtained by resident companies abroad and the solicitation of foreign securities in the CEMAC Zone must be declared and are subject to special control measures for statistical purposes. Transfers of amounts in excess of XAF5 million must be lodged with an authorized intermediary (i.e. a bank authorized by the Central Bank). Documentation must be submitted to the authorities for currency transfers in settlement of imports in excess of XAF 100 million. Expatriate employees may apply for authorization to repatriate their net earnings on a regular basis. Any savings accumulated by expatriates may be repatriated upon departure from Cameroon. All foreign direct investment exceeding XAF 100 million is subject to prior notification to the Ministry of Finance and a post notification after realization. PKF Worldwide Tax Guide 2016/17 9

11 H. PERSONAL TAX Income Tax Rates for Individuals Taxable Income as exceeds But does not exceed Rate - 2,000,000 10% 2,000,000 3,000,000 15% 3,000,000 5,000,000 25% 5,000,000 35% Progressive rates are imposed from 10% to 35%. A surcharge of 10% of the principal tax is also levied on the rates (for additional council tax). I. TREATY AND NON-TREATY WITHHOLDING TAX RATES Dividends % Interest % Royalties % Non-treaty countries: Treaty countries: Canada 15/20 (a) 15/20 (a) 15/20 (a) Central African Republic (c) 16.5 (b) (d) Chad (c) 16.5 (b) (d) Congo (c) 16.5 (b) (d) Equatorial Guinea (c) 16.5 (b) (d) France (b) 7.5/15 (e) Gabon (c) 16.5 (b) (d) Tunisia Notes: (a) The 15% rate applies to payments from a Cameroonian source. The 20% rate applies to payments from a Canadian source. (b) If from a Cameroonian source, the payments are subject to withholding tax under Cameroonian domestic tax law. See Section A. (c) Withholding rates are determined under the domestic tax law of the state of domicile of the payer. (d) Withholding tax is not imposed. The income is subject to tax in the state of the recipient. (e) The 7.5% rate applies to payments for financial services, accounting services and technical assistance. The 15% rate applies to other royalties. PKF Worldwide Tax Guide 2016/17 10

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